VIENNA/FRANKFURT (Reuters) - Austrian lender Raiffeisen Bank International has decided not to sell its Hungarian unit for now, two sources familiar with the situation told Reuters on Wednesday, after media reports that such a deal could be imminent.
Raiffeisen, central and eastern Europe's second-biggest lender, had said in November it was reviewing offers for the loss-making Hungarian business as it focuses on more promising markets in the region.
Hungarian media had reported that tiny Hungarian lender Szechenyi Bank, in which the state holds a 49 percent stake, was in talks to buy the Hungarian unit, which lost 81 million euros (66.8 million pounds) in the first nine months of 2013.
But the two sources said Raiffeisen had decided against doing a deal on the grounds that selling at a knock-down price would trigger losses the bank was not prepared to accept.
"The deal is off," one of the sources said.
Raiffeisen declined to comment on the matter.
Hungary's mostly foreign-owned banking sector enjoyed hefty profits before the 2008 financial crisis but loan defaults, windfall taxes and a 2011 government measure to help foreign-currency loan holders have caused big losses in recent years.
Prime Minister Viktor Orban, who faces elections in 2014, has often said that more than half the banking sector should be in Hungarian ownership. He is considering further steps to help foreign-currency borrowers.
Hungary's economy minister had said on Tuesday that a sale of the Raiffeisen unit could not be taken for granted.
Hungarian National Bank spokesman Istvan Binder said the central bank, which is also the country's financial regulator, had not received any application for licenses linked to a deal.
"The National Bank of Hungary is not aware of applications for licenses to acquire a controlling stake or for asset transfers related to the affected commercial banks," he said in an emailed response to a query.
"For both steps, or forms of sale, the license of the National Bank of Hungary would be needed."
Raiffeisen Bank International shares ended up 2.5 percent at 27.535 euros, while the Stoxx European bank sector index <.SX7P> rose 1.1 percent.
Raiffeisen's Hungarian unit had 6.3 billion euros in assets at the end of September, a 5.2 billion euro loan book, 124 outlets and 2,715 staff.
The Austrian bank has also not ruled out an exit from Ukraine or Slovenia, markets that it has under special review.
(Reporting by Michael Shields and Georgina Prodhan in Vienna, Arno Schuetze in Frankfurt and Krisztina Than in Budapest; editing by Pravin Char and Tom Pfeiffer)